Notes from the American Economic Association

ONE of the unexpected delights of attending a gargantuan academic conference such as the meetings of the American Economic Association (AEA) that finished in San Francisco yesterday is the occasional talk which makes a serious academic point in a particularly entertaining way. Not necessarily what I expected when I went to a panel discussion on Monday morning, involving some academic superstars and where the Spence Report on growth came in for some pretty intensive scrutiny. Everyone made very good points, but it was the closing comments by Princeton's Angus Deaton, also President of the AEA, which brought the house down. Well, people laughed out loud (not common in academic conferences).

Earlier, Ross Levine of Brown University had taken issue with the Commission's method of studying the 13 cases it identified—developing countries with a period of sustained growth of 25 years. Mr Levine pointed out that out of a group of over 100 countries, finding 13 that had grown in a sustained way might essentially be due to chance. Also, he asked, why look only at the experiences of those who succeeded; what about those who failed? And what about earlier generations of developing countries—today's rich countries?

Mr Deaton agreed with Mr Levine's beef with the 13 country success story case study method, but his method of doing so was brilliant. He recalled that as a child growing up in Scotland, then a middle-income country, what people worried about was the weather. So, he said, he decided to find 30 day periods of uninterrupted sunshine in Scotland when he was growing up, and to see what they had in common. He found two, both in the 1950s, both when he was in primary school and when Conservative governments were in power. His conclusions were then that primary (rather than secondary or tertiary) education mattered for good weather, and Conservative governments were good, too. As a skewering of the method used by the Commission, it was outstanding.

Others had gripes too, even if they chose more conventional tools, like power-point presentations, to make them. Raghu Rajan, the Chicago academic who is a former IMF chief economist, had complained that the report said very little about how precisely countries or governments should go about implementing the policies it identified as useful. Meanwhile, Abhijit Banerjee of MIT, while commenting generally favourably about the substance of the report was disappointed in what he called a tendency toward "knee-jerk macro-ism". Because economic growth is a macro phenomenon, he explained, economists have a tendency to look at macro levers—like exchange rates or monetary policy—to generate growth. Mr Banerjee, on the other hand, feels that what matters are things like enterprise growth, entrepreneurship, or even health, where there might be micro levers about which more is understood and which would be profitable to focus on. All useful ideas, and ones to which Michael Spence was quite receptive. It seemed like a good thing, though, that he left well enough alone as far as Mr Deaton's bravura performance was concerned.

It was a good discussion. The AEA has put video up on its site, but unfortunately this is restricted to members. If you happen to be one and didn't know about this technological innovation, it may be worth checking in to see what you missed (since nobody can attend upwards of 30 sessions at the same time).